Oversupply of rental properties hits rents, may lead to more for sale, First National says

An oversupply of rental properties, falling rents and a shortage of listings of houses for sale may lead landlords to consider to start selling properties, according to real estate group First National. First National, which manages 6,500 rental properties around New Zealand, said an oversupply of residential rental properties, coupled with the recession, led to a 3.5% fall in their average nationwide rent over the last three months. Landlords may consider placing houses on the market for sale, with a low level of current listings and with first home buyers currently dominating real estate activity, First National General Manager John Stewart said .

In the three main centres, First National's rental vacancy rates in the Auckland region averaged 9%, while rents fell 5% over the last three months. Christchurch had double the usual number of rentals available, and rents were down an average 5%. However, in Wellington, vacancy rates were dropping with rents stable. "(A)part from a few pockets around the country, supply continued to outstrip demand providing plenty of choice for tenants," Stewart said following the group's quarterly property managers survey. "Some areas have double the usual rental supply although a general shortage of quality rental property was noted." Stewart said that due to tighter economic conditions, tenants were downsizing, reducing work travel distances or moving into shared accommodation. "(U)nless they were downsizing or relocating for a job, people were choosing to sit tight rather than incur additional costs associated with moving," Stewart said. "A number of metropolitan offices report increasing numbers of tenants calling in to announce they have lost their jobs and cannot not pay rent for a week or two," he said. "Of anecdotal interest is the appearance of University and Polytech-tenanted properties falling vacant at the end of the first semester recently and not being picked up for the new term. Perhaps more students are either ceasing their studies or moving home to Mum and Dad." "Demand for lower end properties is helping stabilise rents but we are seeing new tenancy reductions of up to NZ$50 per week for higher end properties in some areas including Auckland, Coromandel, the Bay of Plenty and Christchurch," Stewart said. "Landlords are taking comfort with low interest rates and less expensive acquisitions. However, with a shortage of listings and a supply of buyers, landlords might do well to consider selling as first home purchasers continue to dominate real estate activity." Here is First National's regional summary of rental properties from the quarterly survey:

• Northland "“ Increasing residential vacancy rates over past three months to 8.6%. Rents down by average of 1.6%
• Auckland "“ Static or increasing residential vacancy rates, currently over 9% average. Rents down an average of 5%.
• Central North Island (Bay of Plenty, Rotorua, Taupo) "“ Higher than usual vacancy rates in Bay of Plenty and Rotorua but short term work projects keeping Taupo rental market stable.
• Lower North Island ( Taranaki, northern Wellington, Manawatu) "“ Vacancy rates reducing, rents stable with the occasional increase.
• Upper South Island (Nelson, Blenheim) "“ Rent drops of $10 - $40 pw
• Christchurch "“ Has double the usual number of rentals available (more than 1600 currently advertised on TradeMe). Rents are dropping by average of 5%.
• West Coast "“ Lowest vacancy rate at 0.05%, portfolio rents increased over 8%.
• Lower South Island (Alexandra, Invercargill): Rents are stable. Invercargill still has the cheapest city rents (averaging $200pw for a 3brm house) which have remained stable over the past quarter.